Overbooking with transference option for flights

Yanming Ge; Ziwen Yin; Yifan Xu

doi:10.3934/jimo.2011.7.449

Article Contents

2011, Volume 7, Issue 2: 449-465. Doi: 10.3934/jimo.2011.7.449

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Overbooking with transference option for flights

1.
School of management, Fudan University, Shanghai, 200433
2.
School of management, Fudan University, Shanghai 200433
3.
School of Management, Fudan University, Shanghai 200433

Received: January 31, 2010

Revised: January 31, 2011

Published: March 2011

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Abstract

In today's competitive market of the civil aviation industry, overbooking has been a common strategy for airlines to deal with uncertainty. However, while raising the overbooking level could recover partial losses caused by cancelation and no-show, this policy would bring more uncertainty into the system. As a solution, a new method of "transference" has recently been implemented by some major airlines in China. This method allows some of the overflowed passengers resulting from overbooking to board on a later flight with certain compensation. When it is properly implemented, airline companies could enjoy reduced uncertainty and improved revenue. In this paper, we build a model to depict this method, design a procedure to determine the optimal transferring quantity among flights of different departure times, analyze the overbooking level of each flight, and show improved revenue under the method of "transference". We also present a numerical example to highlight that our results may coincide with reality.

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Mathematics Subject Classification: Primary: 93E20, 90B06; Secondary: 49L20.

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